Perfumania Holdings Inc. (PERF) filed Quarterly Report for the period ended 2009-08-01.
PERFUMANIA is a specialty retailer and wholesale distributor of a wide range of brand name and designer fragrances. Perfumania operates a chain of retail stores specializing in the sale of fragrances at discounted prices up to 75% below the manufacturers' suggested retail prices. Perfumania's wholesale division distributes fragrances and related products primarily to an affiliate. Perfumania.com offers a selection of the Company's more popular products for sale over the Internet and serves as an alternative shopping experience to Perfumania retail customers. Perfumania Holdings Inc. has a market cap of $16.6 million; its shares were traded at around $1.855 .

Highlight of Business Operations:

As discussed above, because the Merger with Model Reorg is treated as a reverse acquisition for accounting purposes, Perfumanias retail sales are included in our condensed consolidated financial statements only for the thirteen weeks ended August 1, 2009. Perfumanias retail sales of $57.6 million for the thirteen weeks ended August 1, 2009 were unchanged compared with the same period in 2008. The average number of stores operated was 367 in the thirteen week period ended August 1, 2009, versus 320 in the prior years comparable period. Perfumanias comparable store sales decreased by 11.6% during the thirteen weeks ended August 1, 2009 from the same period in 2008. Comparable store sales measure sales from stores that have been open for one year or more. We exclude stores that are closed for renovation from comparable store sales from the month during which renovation commences until the first full month after reopening. The average retail price per unit sold during the thirteen weeks ended August 1, 2009 decreased 1.8% from the prior years comparable period while the total number of units sold increased by 1.7%. The decrease in the average retail price per unit sold was due to increased promotional activity to drive sales. The increase in the number of units sold was attributable to the increase in the number of stores operated as the continuing softness in the United States economy and resulting weak mall traffic caused a decrease in the number of customers at our comparable stores.

Perfumanias retail gross profit for the thirteen weeks ended August 1, 2009 decreased by 5.9% to $24.9 million compared with the comparative same period in 2008. For these same periods, Perfumanias retail gross margins were 43.2% and 46.1%, respectively. The decrease in Perfumanias retail gross margins was due to increased promotional activity during the thirteen weeks ended August 1, 2009.

As discussed above, because the Merger with Model is treated as a reverse acquisition for accounting purposes, Perfumanias retail sales are included in our condensed consolidated financial statements only for the twenty-six weeks ended August 1, 2009. Perfumanias retail sales of $104.3 million for the twenty-six weeks ended August 1, 2009 were unchanged compared with the same period in 2008. Perfumanias comparable store sales decreased by 10.5% during the twenty-six weeks ended August 1, 2009. The average retail price per unit sold during the twenty-six weeks ended August 1, 2009 increased 0.6% from the prior years comparable period and the total number of units sold decreased by 0.6%. The number of units sold was affected by the continuing softness in the United States economy and the resulting weak mall traffic. The average number of stores operated was 363 in the twenty-six week period ended August 1, 2009, versus 314 in the prior years comparable period.

Perfumanias retail gross profit for the twenty-six weeks ended August 1, 2009 decreased by 2.9% to $46.9 million compared with the comparative period in 2008. For these same periods, Perfumanias retail gross margins were 45.0% and 46.4%, respectively. The decrease in Perfumanias retail gross margins was due to increased promotional activity, primarily during the latter part of the twenty-six weeks ended August 1, 2009.

Selling, general and administrative expenses increased by 192.9% from $26.4 million in the six months ended July 31, 2008 to $77.4 million in the twenty-six weeks ended August 1, 2009. Excluding the selling, general and administrative expenses of Perfumanias retail division of $54.5 million, which are included for the twenty-six weeks ended August 1, 2009, selling, general and administrative expenses decreased by $3.5 million or 13.3%. Included in selling, general and administrative expenses are expenses charged by Quality King, which were $1.5 million for both the twenty-six weeks ended August 1, 2009 and the six months ended July 31, 2008.

As a result of the covenant defaults described below, effective January 23, 2009, GECC elected to impose the Default Rate of interest on outstanding borrowings, which is 2% higher than the interest rate otherwise applicable. The Company was also required to pay fees equal to 0.375% of the unused amount of the Senior Credit Facility and the outstanding amount of letters of credit under that facility. Under Waiver and Amendment No.1, interest under the Senior Credit Facility for periods after May 26, 2009 will be, at the Companys election unless an event of default exists, either the highest of (A) The Wall Street Journal prime rate, (B) the federal funds rate plus .50% or (C) the sum of 3-month LIBOR plus 1.00% (the Index Rate), in each case plus 3.50% or (ii) LIBOR (but not less than 2.00%) plus 4.50%. The Company is also now required to pay fees equal to 1.00% of the unused amount of the Senior Credit Facility and 4.50% of the outstanding amount of any letters of credit under that facility.

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